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USDJPY at 5-Week Highs: This Is NOT a Market “Moved by Trade Talks”

So -- find out what did drive the U.S. dollar to a 5-week high against the yen

by Nico Isaac
Updated: September 12, 2019

On September 10, the U.S. dollar rallied to a 5-week high against the Japanese yen. According to many experts, the buck's bull run began on August 26 thanks to a single event: President Trump's August 26th claim to have received "two very good calls from Beijing" in which China was "ready to make" a trade deal. Wrote the September 8 Yahoo! Finance:

"The Dollar/Yen rally actually began on August 26... The move was triggered when President Trump said China wanted to resume trade talks.

"This reduced the Japanese Yen's appeal as a safe-haven asset."

The problem is, this alleged thaw between the two trade-warring rivals re-ignited the very next day and continued to ebb and flow. These news items capture the inconsistent climate:

  • August 27 No Peace: "China insists it is unaware of calls to Trump. China did not and will not surrender." (CNBC)
  • August 28 Peace: "Market Rises as Optimism for a US-China trade war thaw" (Business Standard)
  • Sept. 1 and Sept. 2 No Peace: Trump rejects a request to hold off on imposing a 15% tariff on $112 billion of Chinese imports so China retaliates by increasing its own tariffs on $75 billion worth of US products, resulting in this dire headline:

    "US, China Trade War: No New Talks Scheduled. The trade war shows no signs of coming to an end anytime soon." (NY Post)

  • Sept. 5 Peace: "US and China have agreed to return to the negotiating tables in Washington to discuss trade." (CNN Business)
  • Oh, but then on that very same day, Sept. 5, No Peace: "US, China More Divided than Ever" (Reuters)

If USDJPY was really being driven by the tenor of trade relations between the US and China, then the market's performance would reflect that; i.e. it would look like the whipsawing chart below:

91119USDJPYifnewsmoved

But in reality, USDJPY moved in a steady uptrend to 5-week highs on September 10, as seen here:

91119USDJPY

Which begs to reason: Trade talks aren't driving the USDJPY. It's investor psychology, which unfolds as Elliott wave patterns directly on the market's chart that's been driving the dollar rally.

In fact, on August 26, our Currency Pro Service's chief analyst Jim Martens identified a complete, five-wave decline on the daily price chart of USDJPY and prepped the stage for a move higher. Jim wrote:

August 26: "The Friday/early Monday plunge represents either a terminal thrust from a triangle or, alternatively, wave (b) of a flat correction.

"Both scenarios call for a rally.

"Wave (c) of a flat would exceed 107.08 and might reach the 107.85 area before it ends.A correction of the decline from 112.40 would likely reach the 109.30 area..."

82619USDJPY

The dollar's rally against the yen followed right on cue -- while the tenor surrounding US-China trade talks followed nothing.

The trade war with China is too big for mainstream currency analysts to ignore.

For forex investors and traders, it's too big of a distraction not to.

Right now, 24 hours a day, our Currency Pro Service team is working on identifying high-confidence trade setups in USDJPY and other FX markets -- on intraday, daily, and weekly time frames.

Get instant access to our premier Currency Pro Service today.

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